Whole life insurance is a good policy to buy if you:
- Need coverage that lasts for your entire life
- Want the payments to stay the same (called level premiums)
- Want a guaranteed return on the cash value that builds up within the policy
Before you buy, ask a financial advisor if you need whole life insurance, rather than another type of permanent insurance or a term life policy. Whole life insurance fits the bill for some people, but term life insurance is sufficient for many families. Consult a fee-only advisor, if possible. These advisors don’t make commissions from sales, so they can recommend financial products objectively.
Assuming whole life insurance is right for you, here’s a list of the biggest sellers and some tips on finding a good policy.
Largest sellers of whole life insurance
Here’s an overview of the biggest sellers of whole life insurance, listed in alphabetical order.
|Company||Whole life insurance options||Find out more|
Source: LIMRA, based on 2015 annualized premium whole life insurance sales
|Guardian Life Insurance||
Guardian Life review
|MetLife||MetLife plans to separate into two companies. MetLife will sell life insurance and other benefits through employers. The other company, Brighthouse Financial, will sell life insurance and annuities to individuals. The first step in the separation transaction is expected in the first half of 2017.||
|Mutual of Omaha||
Mutual of Omaha review
|New York Life||
New York Life review
Northwestern Mutual review
|Ohio National Life Insurance Company|
|State Farm Life||
State Farm review
Choose the right amount of coverage
To find the right coverage amount when you’re buying whole life insurance, decide what you want the policy to accomplish. A relatively small policy — $10,000, for example — may pay for a funeral. You will need a larger policy if you have other priorities, such as funding a trust for a child with special needs.
Not all sellers of whole life offer policies in small amounts of coverage, and those that market small policies don’t always sell large ones.
Understand the different approval processes
There are three main types of approval processes:
- Simplified issue: You answer some health questions but you don’t have to take a medical exam.
2. Guaranteed issue: There are no health questions or medical exam and you’ll be accepted.
These options are worth considering if you’ve been turned down for standard life insurance due to health problems — but beware of the downsides. The death benefits offered are relatively small, and the costs per $1,000 of coverage are higher than for policies that require a medical exam. In addition, these policies don’t pay the full death benefit if you die within the first few years of coverage.
3. Fully underwritten: This generally involves filling out a lengthy application and taking a life insurance medical exam. Even if you have some health issues, you can generally find the best price by applying for a fully underwritten policy.
Look at the rate of return on cash value
Whole life insurance policies feature a “cash value” savings account. A portion of your premium is invested in the account, which typically grows slowly on a tax-deferred basis. You can borrow against the cash value, use it to buy more coverage or surrender the policy for the cash. (The death benefit is reduced if you don’t repay a loan, and it disappears if you surrender the policy.)
Whole life insurance policies guarantee a minimum growth rate on the cash value. Some policies can perform even better if they earn dividends, which are portions of the insurer’s financial surplus. Dividends generally aren’t guaranteed, but they’re worth taking into account when you compare policies.
Life insurance companies provide illustrations of how each policy’s cash value could perform. Always ask which parts of the illustration are guaranteed. For example, an insurer may give cash value projections based on the payment of dividends, which aren’t guaranteed.
Riders are coverage features you can add to your policy, usually for an extra cost. Examples include a chronic illness rider, which lets you access some of the death benefit if you have a serious illness, and a “disability waiver of premium” rider, which lets you skip payments if you become disabled. Available types and costs of riders vary by insurance company. Make sure your policy has the riders you want.
Check the insurer’s financial strength rating
Look up the financial strength rating of each insurer you’re considering. You can find these through rating firms, such as A.M. Best. Financial strength is important because a strong company has a better chance of being around decades from now to pay claims. Any company with an A.M. Best rating of B+ or higher is a good choice; companies rated B and below are more vulnerable, in A.M. Best’s opinion.
All of the largest life insurance companies, for example, have solid financial strength ratings.
Research the insurer’s reputation for customer service
You can look up an insurer’s complaint ratio score on the National Association of Insurance Commissioners website. The ratio is based on the number of complaints filed against the insurance company with state regulators and is adjusted for market share. The national median is 1, so a score higher than 1 means the company received a larger number of complaints for its size.
Get life insurance quotes for the same amount of coverage from several insurers to compare prices. You may find that rates for whole life insurance vary widely.
Updated March 15, 2017